Frequently Asked Factoring Questions (FAQs)
Q: What is factoring?
A: Factoring is a financial transaction in which a business sells its accounts receivable (its invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business.
Q: How did factoring get started?
A: Link to our Factoring History Page. Click above or below on History link.
Q: How can you be sure of a reputable factoring company?
A: You should always do your research, as you are doing now, with regard to any business endeavor. You should be looking for experience and accreditations (e.g. International Factoring Association). How long has the company been in business? They are members of any of the business associations? What type of systems do they have to support their clients? What is the size of the company – revenue, staff? What amount of invoices have they paid? (Not that sheer size is always the best indicator, but gives you some feel). Always ask for referrals.
Q: Are all factoring companies the same, there seems to be a lot of companies on the web?
A: Of course not, many of the factoring ‘companies’ you see on the web are just ‘aggregators’. These are non-factoring individuals or businesses that use the web to collect potential leads, and then sell them to factoring companies. Nothing wrong with this, but, you are not dealing with a factoring company you may be dealing with a referral service.
Q: What industries are good candidates for factoring?
A: Some of the industries whose business models are good candidates for factoring are:
Trucking firms, Wholesalers, Staffing, Printers, and Manufacturers.
These are not the only industries, but certainly ones that have historically had prevalence toward factoring. Cash flow challenges are an important consideration for any business considering factoring.
Q: How do I keep track of the “factoring status” for my company?
A: The factoring company you choose should have a comprehensive accounting and controls system available for you to use. This will allow you to keep track of where your business and individual transactions stand with the factor. Ask for a demo of the system the factoring company uses before you sign up for one.
Q: How do I find the right factoring company?
A: Here are 10 great questions to ask a prospective factoring company:
Do you do the factoring yourself or do you outsource?
How experienced is your firm and how secure are your finances?
Do you factor for PO’s and/or AR’s?
Is factoring still possible if there is a line of credit, loan, or tax challenges?
What kind of visibility will we have to my customers payments?
Do you have experience with companies our size, in our industry?
Describe how your factoring process works?
What is the minimum contract term? Minimum invoice funding?
Describe the application process, including fees and approximate length?
What is the fee and pricing structure?
Q: How does factoring.com make money?
A: We use Google advertising to offset our small costs. We are trying to provide the best information about factoring on the web.
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